# Consumer Demand Analysis and Estimation Applied Problems

## Week 2 - Assignment

### Consumer Call-for Analysis and Estimation Applied Problems

Please consummate the forthcoming two applied problems:

Problem 1:

Patricia is researching venues for a restaurant concern. She is evaluating three leading marks that she considers leading in her choice: elegancy, subsidence, and expense. The appreciate she places on each mark, however, differs according to what cast of restaurant she is going to set-on-foot. If she discloseds a restaurant in a rural area of Los Angeles, then elegancy is the most leading mark, three times as leading as subsidence, and two times as leading as expense. If she discloseds a restaurant in the Los Angeles metropolitan area, then subsidence becomes three times as leading as elegancy and two times as leading as expense. She is regarding two venues, respectively, a steak restaurant and a pizza restaurant, twain of which are expensed the corresponding. She has rated each mark on a flake of 1 to 100 for each of the two divergent casts of restaurants.

Steak Restaurant

Pizza Restaurant

Taste
Location
Price

80
55
65

70
80
50

1. Which of the two discretions should Patricia hunt if she wants to disclosed a restaurant in a rural area of Los Angeles? Calculate the whole expected gain from each restaurant discretion and assimilate. Graph is not required. Represent your reply, and pretext your calculations.
2. Which of the two discretions should she eliminate if she plans to disclosed a restaurant in the Los Angeles metropolitan area? Represent your reply, and pretext your calculations.
3. Which discretion should she hunt if the presumption of judgment a restaurant venue in a rural area can be reliably estimated as 0.7 and in a metropolitan area as 0.3? Represent your reasoning and pretext your calculations.
4. Provide a name of a scenario in which this peel of determination betwixt two choices, installed on weighing their underlying marks, applies in the “real-world” concern enhancement. Furthermore, what are the benefits and drawbacks, if any, to this regularity of determination making?

Problem 2:

The call-for part for Newton’s Donuts has been estimated as follows:

Qx = -14 – 54Px + 45Py + 0.62Ax

where Qx represents thousands of donuts; Px is the expense per donut; Py is the mediocre expense per donut of other brands of donuts; and Ax represents thousands of dollars departed on advertising Newton’s Donuts. The ordinary appreciates of the stubborn variables are Ax=120, Px=0.95, and Py=0.64.

Show all of your calculations and processes. Represent your reply for each topic in consummate sentences, whenever it is requisite.

1. Calculate the expense elasticity of call-for for Newton’s Donuts and represent what it resources. Represent your reply and pretext your calculations.
2. Derive an countenance for the inverse call-for incurvation for Newton’s Donuts. Represent your reply and pretext your calculations.
3. If the consume of supple Newton’s Donuts is fixed at \$0.15 per donut, should they subjugate the expense and thereafter, hawk past donuts (stiff gain maximization is the company’s intent)?
4. Should Newton’s Donuts bestow past on advertising?